What do people thinik about offsetting Cash + properties (with -ve)? Also, what about purchasing DHA properties as a method?

Investing just to offset tax is never a good stratergy, after all what is the piont in earning a $ then going and losing it just so you don't have to pay tax on it.

Negative gearing should be a short term stratergy and only applied where you are sure your capital growth will offset the amount you lose in holding costs, remember that property only goes up 1/3 of the time, the rest of the time it is flat lining or down trending, but your holding costs are always going to be there,

for example if you bought a property in 2003 for $215,000 and you have been getting $180 a week rent, after all your buying costs, negative geared holding costs and selling costs, you will have to sell it for over $240,000 just to break even, but in alot of areas property hasn't really moved much in the last 4 years,

On the topic of DHA they are good set and forget investments for any body who doesn't have the skill or courage to get into investing hands on,

Hi,

I am in the same position as "Runinnniv". High income, Positive Geared IP .I pay interest and principle (just) on our IP with the rental income.  

I feel that people catergorise cash flow properties is various ways  on this forum.   

Can you elaborate on –  look for a cash-flow positive AFTER TAX property for your next one. This is where the profit on paper is after the tax return is done, so you still get the deductions, and the profit, but not the tax bill.

Cheers

Positive Cashflow AFTER TAX differs from POSITIVE GEARING (sometimes called positive cashflow) this way:

Positive Gearing is where the rent is more than the total holding costs of the property. The profit is pre-tax so the profit is taxable. The holding costs are tax deductible and can be used to minimise the tax bill, but normally there is not much chance of minimising your Personal Income Tax with properties like this. Of course; you are making a profit which is a good thing.

Pos Cashflow after tax is a property that initially is negatively cashflowed, or negatively geared (the cash expenses are more than the rent income), but after the "on-paper" deductions such as depreciation are considered in the tax return, the end result is that the rent plus tax return is more than the cash expenses – the cashflow is positive after tax.
The property is therefore positively cashflowed, but because it was initially neg geared there is no tax bill, so the profit is tax fee.

To create this situation there needs to be good on-paper deductions from the depreciation on the building and fixtures/fittings. Generally, properties that are built after 1987 are the best for this purpose because the Govt allows you to depreciate the construction cost of the building at 2.5% per year for 40 years from date of construction. The fixtures and fittings all have different depreciation "lives".
Newly renovated older properties can also be good for this purpose as well, but you need to have a list of the reno costs for the tax accountant to be able to apply the depreciation to your tax return. A Quantity Surveyor is usually engaged to prepare a Depreciation Schedule, which is then given to your accountant for the tax returns.

There are other factors involved in arriving at this result, such as the interest rate, the rent return, the holding costs, your income and tax rate situation, how much cash deposit you are using, and you need to run the numbers on each property to be able to work it out. With a bit of practice, you can guestimate the likelihood of a prospective property being C.F.P.A.T before you buy.

Personally, I look for properties between 5 and 15 years old ( built after 1987) as they are usually constuctionally sound, but needing a reno of some sort. This gives me good on-paper deductions because of it's younger age, as well as the renos that I will do. These properties are often cheaper to buy due to their condition and can be "value added" more easily through the renos to create more equity more quickly, and also improve the rent return. The combination of all these things is a very powerful wealth accelerator.

If you are considering another property, then this is what I would suggest, rather than a straight out neg geared property, and then your high income will be free to pay down the debt on your PPoR if there is debt there, or do whatever.

Don't impact your lifestyle and become chained to neg geared properties. There are many high income earners who are slaves to their properties (and their jobs) simply because they wanted to pay less tax. That makes no sense to me.